Coupon blending of a swap portfolio

ABSTRACT

Systems and methods for blending a plurality of swaps may include determining a fixed rate for use in blending a plurality of swaps, each of the plurality of swaps having matching economics and a different associated fixed rate. A computing device may determine a first remnant swap for blending fixed rate components of the plurality of swaps using the fixed rate. In some cases, the computing device may determine second remnant swap for blending floating rate components of the plurality of swaps based on the first remnant swap.

CROSS REFERENCE TO RELATED APPLICATIONS

The present application is a continuation of U.S. application Ser. No.16/842,227, filed Apr. 7, 2020 entitled “COUPON BLENDING OF A SWAPPORTFOLIO,” now U.S. Pat. No. ______, which is a continuation of U.S.application Ser. No. 16/532,026, filed Aug. 5, 2019 entitled “COUPONBLENDING OF A SWAP PORTFOLIO,” now U.S. Pat. No. 10,650,457, which is acontinuation of U.S. application Ser. No. 14/338,052, filed Jul. 22,2014 entitled “COUPON BLENDING OF A SWAP PORTFOLIO,” now U.S. Pat. No.10,475,123, which claims priority to U.S. provisional patent applicationSer. No. 61/954,006, filed Mar. 17, 2014, the entire disclosures of eachof which are hereby incorporated by reference and relied upon.

BACKGROUND

Over-the-counter (OTC) products include financial instruments that arebought, sold, traded, exchanged, and/or swapped between counterparties.Many OTC derivatives exist to fill a wide range of needs forcounterparties, including limiting or mitigating exposure to risksand/or maximizing cash flow. After an exchange of an OTC product,counterparties may expend resources managing the product for theduration of its life. Management may be complicated based on the numberof exchanges and/or the specific terms of the contract.

An interest rate swap (IRS) is an example of a type of OTC product wherethe parties agree to exchange streams of future interest payments basedon a specified principal or notional amount. Each stream may be referredto as a leg. Swaps are often used to hedge certain risks, for instance,interest rate risk. They can also be used for speculative purposes.

An example of a swap includes a plain fixed-to-floating, or “vanilla,”interest rate swap. The vanilla swap includes an exchange of intereststreams where one stream is based on a floating rate and the otherinterest stream is based on a fixed rate. In a vanilla swap, one partymakes periodic interest payments to the other based on a variableinterest rate. The variable rate may be linked to a periodically knownor agreed upon rate for the term of the swap such as the LondonInterbank Offered Rate (LIBOR).

In return for the stream of payments based on the variable rate, theparty may receive periodic interest payments based on a fixed rate. Thepayments are calculated over the notional amount. The first rate iscalled variable, because it is reset at the beginning of each interestcalculation period to the then current reference rate, such as LIBORpublished rate. The parties to an IRS swap generally utilize theseexchanges to limit, or manage, exposure to fluctuations in interestrates, or to obtain lower interest rates than would otherwise beunobtainable.

Usually, at least one of the legs to a swap has a variable rate. Thevariable rate may be based on any agreed upon factors such as areference rate, the total return of a swap, an economic statistic, etc.Other examples of swaps include total return swaps, and equity swaps.

The expiration or maturity of the future streams of payments may occurwell into the future. Each party may have a book of existing and newIRSs having a variety of maturity dates. The parties may expendsubstantial resources tracking and managing their book of IRSs and otherOTC products. In addition, for each IRS, the party maintains an elementof risk that one of its counterparties will default on a payment.

Currently, financial institutions such as banks trade interest ratepayments and/or interest rate swaps over the counter. Streams of futurepayments must be valued to determine a current market price. The marketvalue of a swap is the sum of the difference between the net presentvalue (NPV) of the future fixed cash flows and the floating rate and theprice of the swap is determined based on the fixed rate. Because thefixed rate of a particular swap is determined based on the availablefixed rate at the time the price is struck, the fixed rates associatedwith two different swaps will rarely be the same. As such, each swapthat is struck causes a separate line item to be booked until anopposite swap with the same fixed rate is struck. As such, it would bedesirable to provide a way to blend coupons for reducing notionalamounts and/or line items (e.g., swaps) on a financial organization'sbooks.

SUMMARY

Systems and methods are described for reducing notional amount and/orclearing line items associated with swaps that are on an organization'sbooks. In some cases, a method for reducing a notional amount and/orclearing line items associated with a portfolio of swaps may includedetermining a rate for use in blending a plurality of swaps, each of theplurality of swaps having matching economics and a different associatedfixed rate. The method may further include determining, by one or morecomputing devices, a first remnant (e.g., a coupon adjustment swap) forblending fixed rate components of the plurality of swaps using thedetermined rate and determining a second remnant swap (e.g., a floatadjustment swap) for blending floating rate components of the pluralityof swaps based on the coupon adjustment swap.

In some cases, a non-transitory computer-readable medium may containcomputer-executable instructions, that when executed by a processor, maycause one or more computing devices to determine a rate for use inblending a plurality of swaps, each of the plurality of swaps havingmatching economics and a different associated fixed rate, determine acoupon adjustment swap for blending fixed rate components of theplurality of swaps using the determined rate, and determine a floatadjustment swap for blending floating rate components of the pluralityof swaps based on the coupon adjustment swap.

In some cases, a system for reducing notional amount and/or clearingline items associated with swaps that are on an organization's books mayinclude a network and one or more computing devices. The one or morecomputing devices may include a processor and one or more non-transitorymemory devices. The memory device may be configured to storeinstructions, that when executed by the processor, cause the one or morecomputing devices to determine a rate for use in blending a plurality ofswaps, each of the plurality of swaps having matching economics and adifferent associated fixed rate, determine, using one or more computingdevices, a coupon adjustment swap for blending fixed rate components ofthe plurality of swaps using the determined rate, determine a floatadjustment swap for blending floating rate components of the pluralityof swaps based on the coupon adjustment swap, and communicate, via thenetwork, information about the coupon adjustment swap and the floatadjustment swap to an institution associated with the plurality ofswaps. In some cases, the system may further include a user interfacefor allowing a user to enter and/or view information about a portfolioof swaps. For example, the user interface may facilitate entry of adesired fixed rate for use in combining coupons of a plurality of swaps.In some cases, the user interface may facilitate user viewing of aresult of the coupon blending process, such as by displaying a portfolioview prior to coupon blending, a portfolio view after coupon blending,and/or an indication of a reduced gross notional obligation resultingfrom the coupon blending process.

The details of these and other embodiments of the present invention areset forth in the accompanying drawings and the description below. Otherfeatures and advantages of the invention will be apparent from thedescription and drawings.

BRIEF DESCRIPTION OF THE DRAWINGS

The present invention may take physical form in certain parts and steps,embodiments of which will be described in detail in the followingdescription and illustrated in the accompanying drawings that form apart hereof, wherein:

FIG. 1 shows an illustrative trading network environment forimplementing trading systems and methods according to at least someembodiments.

FIG. 2 shows a portion of an illustrative system for blending couponsassociated with a plurality of swaps in accordance with an aspect of theinvention.

FIG. 3 illustrates a data table illustrative of a method for blendingcoupons of a swap portfolio in accordance with an aspect the invention.

FIGS. 4 and 5 show illustrative flow diagrams for blending couponsassociated with a plurality of swaps in accordance with an aspect theinvention.

FIG. 6 shows a data table including information about an illustrativeportfolio to be compressed in accordance with an aspect the invention.

FIG. 7 shows an illustrative representation of portfolio compressionover time in accordance with an aspect the invention.

FIGS. 8-13 illustrate data tables illustrative of a method for blendingcoupons of a swap portfolio in accordance with an aspect the invention.

DETAILED DESCRIPTION

In some cases, clients may desire to enter into one or more swaps (e.g.,interest rate swaps) for hedging a position in a market. For example, anorganization may have multiple positions in fixed rate mortgages, whilehaving less exposure to products associated with a floating rate. Atsuch times, the organization may desire to enter into one or more swapswith another party to hedge risks that may be associated with having amajority of fixed rate products. For example, when interest rates fall,the organization may make money by having a majority of fixed rateproducts in a portfolio. However, when the market goes up (e.g.,interest rates rise), the organization may lose the opportunity toprofit from the higher interest rates. By hedging these risks, theparties to the interest rate swaps may have a goal to allow their assetsand/or liabilities to at least remain near the starting levels and/orminimize any losses. However, any gains that may be had during favorablemarket conditions may be limited by increasing the exposure to thefloating point products.

Generally, an available fixed rate dictates the price of a swap, wherethe fixed rate changes over time. For example, a dealer may quote a swapat a first rate at a time (e.g., time 0). A short time later (e.g.,about 10 minutes, about 30 minutes, etc.), the same dealer may provide aquote for a similar swap but having a second rate that is different thanthe first rate. Once the swaps are entered, the fixed rate will remainfixed for the lifetime of the swap. Over time, a swap purchaser (e.g.,an individual, an organization, a business, etc.) may develop aportfolio of swaps, including the swaps of at least one pay swap (e.g.,providing the fixed rate leg of the swap) and at least one receive swap(e.g., providing the floating rate leg of the swap). Few, if any, swapsmay have the same interest rate resulting in a large number of swaps toremain open on the organization's books.

An organization or an individual may enter into multiple swaps during agiven time frame (e.g., a day, a week, a month, etc.) and, as a result,may have multiple line items in their books in relation to these swaps.For example, a customer may have a first swap for paying a set amount(e.g., $100 million) and a second swap for receiving the same set amount(e.g., $100 million). Although these swaps are associated with the samenotional amount, the interest rates are likely to be different. As such,these swaps will not net out. Rather, the $200 million remains open onthe organization's books. These swaps may further be subject toregulatory requirements, such as governmental requirements,international banking requirements (e.g., BASEL 3 requirements), and/orthe like. These regulatory requirements may, in turn, subject theorganization to capital charges (e.g., a specified cash reserve) toensure that a financial organization has enough cash to cover theirliabilities regarding their swap portfolio.

In an illustrative example, a financial institution may have a houseaccount having a number of swaps open in the account. Under theregulatory requirements, the financial institution is required to setaside capital (e.g., a margin account) to cover the open swaps. Thiscash requirement may be dependent upon, at least in part, on the grossnotional amount associated with the swap portfolio. As such, thefinancial organization can reduce its capital requirements by reducingthe number of line items on their books, and/or by reducing the grossnotional of the swap portfolio.

In some cases, multiple line items having the same interest rate may becollapsed together (e.g., canceled). For example, a pay swap having anassociated first notional amount of may be offset by a second notionalamount associated with a receive swap when the pay and receive swapshave the same interest rate. However, this is rare. For example, a swapparticipant may use an investment strategy for achieving the same fixedrate for two or more different swaps. In such cases, the customer mayspecify a desired rate for a swap when contacting a dealer. While thedealer may be able to find a counter-party willing to enter into a swapat that rate, the swap may incur a fee to equalize the economics of theswap. For example, at the desired fixed rate, the economics of the swapmay favor the paying party or the receiving party. By equalizing thesedifferences, the swap may then be structured to allow the total value ofthe fixed rate leg to be equal to the floating rate leg of the swap.

In some cases, a clearinghouse may monitor a portfolio of swaps todetermine whether any of the total notional value of the swap portfoliomay be canceled or otherwise offset. For example, the clearinghouse may,on a periodic (e.g., daily) basis, process an algorithm to determine anet value of a client's swap portfolio and send a message to the clientto terminate a line item, or offset at least a portion of the grossnotional value when two or more line items may be collapsed.

In the past, the over-the-counter swap market was largely a bespokemarket, where a customer desiring to enter into a swap would contact,such as by telephone, one or more dealers to determine which dealerwould offer the best price to enter into the deal. In such cases, theswap may be entered on a common platform, but the trade execution wascompleted by phone. Because swaps may not be fully transparent,governmental regulations have required that swaps be executed via a SwapExecution Facility (SEF). A SEF is a regulated platform for swap tradingthat provides pre-trade information, such as bids, offers, and the like,and/or an execution mechanism to facilitate execution of swaptransactions among eligible participants. Over time more and more typesof swaps may be executed via a SEF, such as interest rate swaps. Becausethe SEF may operate using a more automated swap market mechanism, thelikelihood that a customer may enter into different swaps, where eachshare a same interest rate will become increasingly rare. A SEF mayexecute many swaps with multiple coupons at a centralized location. Insome cases, different swaps may share the same, or similar, economics toanother swap. However, the coupons are likely to differ due to the swapsexecuting at different times. As such a client may quickly build a book(e.g., swap portfolio) with many swap line items, which, in turn, wouldrequire the client to incur a large capital obligation corresponding tothe gross notional of the book of swaps.

Exemplary Operating Environment

Aspects of at least some embodiments can be implemented with computersystems and computer networks that allow users to communicate tradinginformation. An exemplary trading network environment for implementingtrading systems and methods according to at least some embodiments isshown in FIG. 1. The implemented trading systems and methods can includesystems and methods, such as are described herein, that facilitatetrading and other activities associated with financial products based oncurrency pairs.

A computer system, such as an exchange computer system 100, can beoperated by a financial product exchange and configured to performoperations of the exchange for, e.g., trading and otherwise processingvarious financial products. Financial products of the exchange mayinclude, without limitation, futures contracts, options on futurescontracts (“futures contract options”), and other types of derivativecontracts. Financial products traded or otherwise processed by theexchange may also include over-the-counter (OTC) products such as OTCforwards, OTC options, etc.

The exchange computer system 100 receives orders for financial products,matches orders to execute trades, transmits market data related toorders and trades to users, and performs other operations associatedwith a financial product exchange. The exchange computer system 100 maybe implemented with one or more mainframe, desktop or other computers.In one embodiment, a computer device uses one or more 64-bit processors.A user database 102 includes information identifying traders and otherusers of the exchange computer system 100. Data may include user namesand passwords. An account data module 104 may process accountinformation that may be used during trades. A match engine module 106 isincluded to match prices and other parameters of bid and offer orders.Match engine module 106 may be implemented with software that executesone or more algorithms for matching bids and offers.

A trade database 108 may be included to store information identifyingtrades and descriptions of trades. In particular, a trade database maystore information identifying the time that a trade took place and thecontract price. An order book module 110 may be included to store pricesand other data for bid and offer orders, and/or to compute (or otherwisedetermine) current bid and offer prices. A market data module 112 may beincluded to collect market data, e.g., data regarding current bids andoffers for futures contracts, futures contract options and otherderivative products. Module 112 may also prepare the collected marketdata for transmission to users. A risk management module 134 may beincluded to compute and determine a user's risk utilization in relationto the user's defined risk thresholds. An order processor module 136 maybe included to decompose delta based and bulk order types for furtherprocessing by order book module 110 and match engine module 106.

A clearinghouse module 140 may be included as part of the exchangecomputer system 100 and configured to carry out clearinghouseoperations. Module 140 may receive data from and/or transmit data totrade database 108 and/or other modules of the exchange computer system100 regarding trades of futures contracts, futures contracts options,OTC options and contracts, and other financial products. Clearinghousemodule 140 may facilitate the financial product exchange acting as oneof the parties to every traded contract or other product. For example,the exchange computer system 100 may match an offer by party A to sell afinancial product with a bid by party B to purchase a like financialproduct. Module 140 may then create a financial product between party Aand the exchange and an offsetting second financial product between theexchange and party B. As another example, module 140 may maintain margindata with regard to clearing members and/or trading customers. As partof such margin-related operations, module 140 may store and maintaindata regarding the values of various contracts and other instruments,determine mark-to-market and final settlement amounts, confirm receiptand/or payment of amounts due from margin accounts, confirm satisfactionof final settlement obligations (physical or cash), etc. As discussed infurther detail below, module 140 may determine values for performancebonds associated with trading in products based on various types ofcurrency pairs.

Each of the modules 102 through 140 could be separate softwarecomponents executing within a single computer, separate hardwarecomponents (e.g., dedicated hardware devices) in a single computer,separate computers in a networked computer system, or any combinationthereof (e.g., different computers in a networked system may executesoftware modules corresponding more than one of the modules 102-140).

Computer device 114 is shown directly connected to the exchange computersystem 100. The exchange computer system 100 and computer device 114 maybe connected via a T1 line, a common local area network (LAN) or othermechanism for connecting computer devices. Computer device 114 is shownconnected to a radio 132. The user of radio 132 may be a trader orexchange employee. The radio user may transmit orders or otherinformation to a user of computer device 114. The user of computerdevice 114 may then transmit the trade or other information to theexchange computer system 100.

Computer devices 116 and 118 are coupled to a LAN 124. LAN 124 mayimplement one or more of the well-known LAN topologies and may use avariety of different protocols, such as Ethernet. Computer devices 116and 118 may communicate with each other and other computers and devicesconnected to LAN 124. Computers and other devices may be connected toLAN 124 via twisted pair wires, coaxial cable, fiber optics, radio linksor other media.

A wireless personal digital assistant device (PDA) 122 may communicatewith LAN 124 or the Internet 126 via radio waves. PDA 122 may alsocommunicate with the exchange computer system 100 via a conventionalwireless hub 128. As used herein, a PDA includes mobile telephones andother wireless devices that communicate with a network via radio waves.

FIG. 1 also shows LAN 124 connected to the Internet 126. LAN 124 mayinclude a router to connect LAN 124 to the Internet 126. Computer device120 is shown connected directly to the Internet 126. The connection maybe via a modem, DSL line, satellite dish or any other device forconnecting a computer device to the Internet. Computers 116, 118 and 120may communicate with each other via the Internet 126 and/or LAN 124.

One or more market makers 130 may maintain a market by providingconstant bid and offer prices for a derivative or security to exchangecomputer system 100. The exchange computer system 100 may also includetrade engine 138. Trade engine 138 may, e.g., receive incomingcommunications from various channel partners and route thosecommunications to one or more other modules of the exchange computersystem 100.

One skilled in the art will appreciate that numerous additionalcomputers and systems may be coupled to the exchange computer system100. Such computers and systems may include, without limitation,additional clearing systems (e.g., computer systems of clearing memberfirms), regulatory systems and fee systems.

The operations of computer devices and systems shown in FIG. 1 may becontrolled by computer-executable instructions stored on non-transitorycomputer-readable media. For example, computer device 116 may includecomputer-executable instructions for receiving market data from theexchange computer system 100 and displaying that information to a user.As another example, clearinghouse module 140 and/or other modules of theexchange computer system 100 may include computer-executableinstructions for performing operations associated with determiningperformance bond contributions associated with holdings in products thatare based on various types of currency pairs.

Of course, numerous additional servers, computers, handheld devices,personal digital assistants, telephones and other devices may also beconnected to the exchange computer system 100. Moreover, one skilled inthe art will appreciate that the topology shown in FIG. 1 is merely anexample and that the components shown in FIG. 1 may be connected bynumerous alternative topologies.

Exemplary Embodiments

In some cases, the clearinghouse module 140 may be configured to monitorand/or otherwise manage a capital obligation associated with a pluralityof swaps, such as a swap portfolio. In at least some embodiments, theexchange computer system 100 (or “system 100”) receives, stores,generates and/or otherwise and processes data. In accordance withvarious aspects of the invention, a clearinghouse (e.g., theclearinghouse module 140) may act as a guarantor of the agreement forthe derivative. As discussed above, a derivative (e.g., an over thecounter swap) may be cleared and guaranteed by the clearinghouse. Thismay promise more interesting capital efficiencies to allow institutionsto reduce a capital charge associated with a plurality of swaps, such asby reducing a gross notional and/or reducing line items associated withthe plurality of swaps.

FIG. 2 shows a portion of an illustrative system 200 for blendingcoupons associated with a plurality of swaps in accordance with anaspect of the invention. In some cases, the illustrative system 200 mayinclude a financial institution computing system 210 communicativelycoupled to a clearinghouse computer system 240 via a network 205 (e.g.,a wide area network (WAN), the LAN 124, the Internet 126, etc.). Thefinancial institution computing system 210 may include a data repository212, one or more computing devices 214, and, in some cases, at least oneuser interface 216. In some cases, the data repository 212 may storeinformation about one or more swap portfolios 222, where the swapportfolios may include information about two or more different swaps(e.g., swap 1, swap 2, swap n, etc.). For example, the swap informationmay include a fixed rate value, a floating rate value, a notional value,and/or a cash value for each of the plurality of different swaps of theswap portfolios 222. In some cases, the swap portfolios 222 may beassociated with the financial institution, and/or one or more differentcustomers of the financial institution. For example, a financial entityand/or a customer of the financial entity may desire to enter into oneor more different swaps to hedge financial risk due to a plurality offixed rate holdings and/or a plurality of floating rate holdings. Insome cases, a computing device 215 and/or the user interface 216 may beused to facilitate user access to the one or more swap portfolios 222.For example, a user may log into the financial institution computingsystem 210 via one or more user interface screens accessible via theuser interface 216. In some cases, the user interface 216 is at ageographical location local to the financial institution computer system210 and/or at a geographical location of the user.

In some cases, the clearinghouse computer system 240 may include one ormore of a data repository 242, a computing device 244 and/or a userinterface 246. The clearinghouse computer system 240 may becommunicatively coupled to at least one financial institution computersystem, such as the financial institution computing system 210 via thenetwork 205. In some cases, the clearinghouse computer system 240 may beconfigured to obtain information about one or more of the swapportfolios 222, process the information to blend coupons associated withthe different swaps of the swap portfolios 222 and communicateinformation about the blended swaps to the financial institutioncomputing system 210 to reduce one or more line items associated withthe swap portfolios 222 and/or to reduce a gross notional valueassociated with the swap portfolios 222 to reduce a total capital chargeincurred by the financial institution in relation to the swap portfolios222.

FIG. 3 illustrates a data table 300 illustrative of a method forblending coupons of a swap portfolio by the clearinghouse computingsystem 240 in accordance with an aspect of the invention. The data table300 includes information about a plurality of swaps 310 (e.g., the swapportfolios 222) held at the financial institution, a fixed rate 311, anda notional value 321 associated with each of the swaps 310. A weightednotional 325 may be calculated as a product of the fixed rate 311 andthe notional value 321 for each of the swaps 310. The table may alsoinclude fixed cash flows 330 associated with each of the swaps 310,which may include one or more pay swaps and one or more receive swaps.The computing device 244 may be configured to compute an average rate320 associated with the plurality of swaps 310. While the average may becalculated with high precision (e.g., greater than 5 decimal pointprecision), the market may only support a lesser degree of precision. Assuch the computing device 244 may round the average rate 320 to arounded average rate 322 having a precision common to the financialindustry (e.g., about five decimal point precision).

In blending the coupons of the swap portfolio 222, the computing device244 may then be configured to calculate a gross notional sum 326 of thenotional values 321 and a gross weighted notional sum 327 of theweighted notionals. A weighted average rate 323 may be calculated bydividing the gross weighted notional sum 327 of the weighted notionalsby the gross notional sum 326 of the notionals. In some cases, theweighted average rate 323 may have a high precision (e.g., greater thanfive decimal places, about 11 decimal places, etc.) such that the cashflows 335 associated with the gross notional sum 326 and the grossweighted notional sum 327 are equal to the total cash flows 336 for theplurality of swaps 310 in the portfolio 222.

In some cases, to blend the coupons associated with the swaps 310 of aparticular portfolio, a single blended swap may be constructed havingthe same financials as the sum of the swaps 310 in the portfolio 222.For example, a theoretical swap may be constructed having a notionalequal to the gross notional sum 326 of the notionals of the swaps 310.In this case, the rate of the single blended swap may be found bydividing the gross weighted notional sum 327 of the weighted notionals325 by the gross notional sum 326 of the notional values 321. Toproperly blend the swaps 310, the cash flows of the single blended swapmust be equal to the total cash flows 336 of the swaps 310. In manycases, the resulting precision required for the coupon matching is muchgreater than (e.g., greater than about five decimal places, about 11decimal places, and the like) the precision commonly supported in thefinancial industry. As such, methods discussed herein may be used toblend the coupons, combine line items, and/or reduce a gross notionalvalue associated with the plurality of swaps 310 included in the swapportfolio 222.

In some cases, the coupons of the swaps 310 may be blended into twodifferent swaps. A first remnant swap (e.g., a coupon adjustment swap)may be used for blending a component associated with the fixed rateportion of the plurality of swaps 310 and a second remnant swap (e.g., afloat adjustment swap) may be used for blending a component associatedwith the floating rate portion of the swaps.

In some cases, the coupon adjustment swap may be determined as shown intable 340. In a first step, a rate may be determined (e.g., the roundedaverage rate 322 of the swaps 310, a user selected rate, a currentmarket rate, a past market rate, etc.) for the coupon adjustment swap.Next, a weighted notional value is associated with the coupon adjustmentswap. For example, because the coupon adjustment swap is desired toblend the swaps 310, the gross weighted notional sum 327 of the weightednotionals 325 of the swaps 310 is assigned as the weighted notionalvalue of the coupon adjustment swap. Next, the notional value may bedetermined based on the rate 341 and the weighted notional of the couponadjustment, such as by dividing the weighted notional value by the rate341. However, to properly blend the fixed rate components of the swaps310, the cash flows 345 of the coupon adjustment swap must match thetotal fixed cash flows values associated with the swaps 310. Forexample, the notional amount may be adjusted to keep the rate 341 at theproper value.

The float adjustment swap may be used to blend the float rate portion ofthe swaps 310. For example, the sum of the float payments for the floatadjustment swap and the coupon adjustment swap will match the originaltrades. For example, the notional value 362 of the float adjustment swapmay be computed by subtracting the notional 342 of the coupon adjustmentswap from the total net notional, such as the gross notional sum 326.The rate 361 of the float adjustment swap may be set to zero because thecoupon adjustment swap fully accounts for the fixed coupons of the swaps310.

As can be seen, the plurality of swaps 310 has been reduced to two lineitems, the coupon adjustment swap, and the float adjustment swap, andthe gross notional associated with the plurality of swaps has beenreduced.

FIGS. 4 and 5 show illustrative flow diagrams 400, 500 for blendingcoupons associated with a plurality of swaps in accordance with anaspect the invention. For example, at step 410, a computing device(e.g., the computing device 244, the clearinghouse module 140, etc.) maydetermine a rate for use in blending a plurality of swaps (e.g., theswaps 310), each of the plurality of swaps 310 having matching economicsand a different associated fixed rate. In some cases, the swaps includeboth pay swaps and receive swaps. At step 420, the computing device 244may determine a coupon adjustment swap for blending fixed ratecomponents of the plurality of swaps using the determined rate. At step430, the computing device 244 may be configured to determine a floatadjustment swap for blending floating rate components of the pluralityof swaps based on the coupon adjustment swap.

In some cases, the rate of the coupon adjustment swap may be determinedby calculating a rounded average rate (e.g., a simple average) of ratesassociated with each of the plurality of swaps. In other embodiments,the rate of the coupon adjustment swap may be determined by determininga rate corresponding to a currently quoted swap having matchingeconomics to the plurality of swaps and/or receiving a user enteredrate.

In some cases, the computer device may determine a weighted notionalvalue associated with each of the plurality of swaps, wherein eachweighted notional value for a particular swap is determined based on thefixed rate and a notional value associated with the particular swap. Thenotional value associated with the coupon adjustment swap may bedetermined using the rate and the gross weighted notional sum 327 ofweighted notionals associated with the plurality of swaps such that acash flow of the coupon adjustment swap may be equal to the sum of thefixed cash flows associated with the plurality of swaps.

In some cases, determining the float adjustment swap may comprisedetermining a zero fixed rate trade having a notional value of adifference between a gross notional sum 326 of notional values 321 ofthe plurality of swaps 310 and a notional value 342 of the couponadjustment swap. The computing device 224 may be configured to obtain

The plurality of swaps from a data repository of a financialinstitution, compare a count of the plurality of swaps to a criterion,and responsive to the count meeting the criterion, blending at least aportion of the plurality of swaps using the coupon adjustment swap andthe float adjustment swap.

In some cases, the method 400 may include determining a total notionalamount associated with a plurality of swaps having same economics,comparing the total notional amount to a criterion, and, responsive tothe total notional amount meeting the criterion, blending at least aportion of the plurality of swaps 310 using the coupon adjustment swapand the float adjustment swap. In some cases, individual swaps ofplurality of swaps to be blended may be selected by a user.

In some cases, the computing device 244 may blend at least a portion ofthe plurality of swaps 310 using the coupon adjustment swap and thefloat adjustment swap on a daily basis and communicate, via the network205, information about the coupon adjustment swap and the floatadjustment swap to a financial institution associated with the pluralityof swaps 310. The computing device 224 may further communicate, via thenetwork 205, information about at least the blended portion of theplurality of the swaps to the financial institution, wherein at leastthe information about the coupon adjustment swap and the floatadjustment swap are to be used to meet a regulatory requirement.

The flow diagram 500 of FIG. 5 may allow a computing device 224 to blendtwo or more different swaps. As discussed above, coupon blending is aform of compression that may be used to reduce notional amounts and/orline items for trades that are economically equivalent except for theirfixed rates. In some cases, a goal for market participants is to reducecapital requirements associated with a portfolio of swaps by reducinggross notional amounts and/or the number of line items associated withthe swaps. Coupon blending may be accomplished using both pay swaps andreceive swaps. A fixed rate associated with the blended coupon may beconfigured to lie within a range of rates associated with the differentswaps included in the blended portfolio of swaps. Further, the blendedcoupon may be designed to reduce the number of line items associatedwith the swaps and/or reduce the gross notional corresponding to theportfolio of swaps. Also, the precision of the fixed rate for use inspecifying the blended trade having the blended coupon may be chosen tobe within a precision range commonly used in the marketplace. In somecases, the blended coupon and the associated blended trade may berepresented by two netting options. In some cases, a number of swaps mayautomatically be blended. In some cases, a user may select one or moreswaps to be included and/or one or more swaps to be excluded frominclusion in the blended trade. In some cases, when an account (e.g., aportfolio of swaps) is specified for blending, a standard netting optionmay be applied to the account before the calculating the coupon blendingmethod of FIG. 4 or FIG. 5. For example, for swaps having a sameinterest rate, the notionals of these swaps may net out automatically.

At 510, the method may begin by determining a fixed coupon rate for afirst calculated swap, where the first calculated swap corresponds to ablend of fixed rate portions of a plurality of swaps, such as the swaps310. In some cases, a simple average of the fixed rates associated withthe plurality of swaps may be calculated to determine the fixed rate ofthe first calculated swap. The determined rate may be rounded accordingto a specified decimal precision (e.g., 5 decimal places, etc.). Thisaverage rate may be used to assign a rate that is close to a marketrate, an example is shown below in Table 1 and equation (1).

TABLE 1 Calculating an average rate for a swap portfolio OriginalPortfolio Fixed Rate Swap 1 3.1224 Swap 2 3.505 Swap 3 1.8 Swap 4 2.95Swap 5 2.988 Swap 6 3.258 Swap 7 2.9545 Swap 8 3.248 Swap 9 3.2254 Swap10 3.4591 Simple Average Rounded to 5 Decimals 3.051041000 3.05104

A simple average of the fixed rates of the swaps in the swap portfoliomay be calculated using equation (1), where n is the number of ratesincluded in the calculation.

Simple Average=(Rate₁+Rate₂+ . . . Rate_(n))÷n   (1)

At 520, a weighted average rate and a weighted notional amount arecalculated and associated with the plurality of swaps.

Weighted Notional=Fixed Rate*Notional   (2)

Net Weighted Notional=, Σ_(i=1) ^(n)(Weighted Notional)_(i)   (3)

Weighted Average Rate=(Net Weighted Notional)/(Net Notional)   (4)

TABLE 2 Determine Weighted Average Rate and Net Weighted NotionalWeighted Fixed Rate Notional Notional Swap 1 3.1224 −100,000,000.00−312,240,000.00 Swap 2 3.505 99,000,000.00 346,995,000.00 Swap 3 1.8−1,200,000.00 −2,160,000.00 Swap 4 2.95 15,600,000.00 46,020,000.00 Swap5 2.988 −30,000,000.00 −89,640,000.00 Swap 6 3.258 16,500,000.0053,757,000.00 Swap 7 2.9545 33,470,000.00 98,887,115.00 Swap 8 3.24820,000,000.00 64,960,000.00 Swap 9 3.2254 −1,500,000.00 −4,838,100.00Swap 10 3.4591 45,000,000.00 −155,659,500.00 Rounded Simple to 5 NetWeighted Weighted Average Decimals Net Notional Notional Average Rate3.051041000 3.05104 6,870,000.00 46,081,515.00 6.70764410480

At 530, the first calculated swap is created using a notationalcalculated for matching the net fixed coupons of the plurality of swapsincluded in the original portfolio. The weighted average rate may oftenbe an off-market rate. As such, the notional for the first calculatedswap may be adjusted to keep the rate at our simple average rate, chosento be substantially similar to a current market rate, or set to aspecified rate by a user. Once determined the Notional may be rounded totwo decimal places. In creating the first calculated swap, theassociated fixed coupon amounts will match the fixed coupon amounts paidon the original swap portfolio. This swap corresponds to the “Fixed”cash flow portion of the original swaps included in the swap portfolio.

First Remnant Trade Notional=Net Weighted Notional÷Rounded Average Rate  (5)

TABLE 3 Fixed Coupon Amounts match the Coupon Amount of the OriginalPortfolio: Net Weighted Simple Fixed Coupon Amounts Notional AverageNotional 91 182 271 364 46,081,515.00 3.05104 15,103,543.38 $116,483.83$116,483.83 $113,923.75 $119,043.91

TABLE 4 First Calculated Swap Weighted Average Rate Net Notional6.70764410480 6,870,000.00 91 182 271 364 Fixed Coupons of OriginalPortfolio $116,483.83 $116,483.83 $113,923.75 $119,043.91 Net Difference$— $— $— $—

At 540, the second calculated swap is created to match the floating ratecash flows of the plurality of swaps. The sum of float payments of boththe first calculated swap and the second calculated swap match the floatpayments associated with the swaps included in the original swapportfolio. The notional amount on calculated swap 2 is calculated asfollows in equation (5)

Second Remnant Trade Notional=Net Notional−First Remnant Trade Notional  (6)

As the fixed coupon on calculated swap 1 fully accounts for the fixedcoupons of the original trades, a fixed rate is not required on thesecond calculated swap. As such, the associated fixed rate is set to 0.

TABLE 5 Compute the Notional of the Second Calculated swap (CS2) NetNotional CS1 Notional CS2 Notional 6,870,000 15,103,543.38 −8,233,543.38

As can be seen, the line items of a 10 trade swap portfolio have beenreduced to two calculated swaps. Further, all other economic detailswill match the trades in the original portfolio.

TABLE 6 Coupon Blended Swap Portfolio Trade Notional Fixed RateCalculated swap 1 15,103,543.38 3.05104 Calculated swap 2 −8,233,543.380

In some cases, a market participant may desire to combine (e.g.,compress) one or more holdings in a portfolio, such as by blendingcoupons to reduce notional amounts and/or line items (e.g., swaps) on afinancial organization's books. This compression may be used to reducenotional amounts and/or line items for pay-fixed cleared interest rateswaps, receive-fixed cleared interest rate swaps and/or a combination ofpay-fixed and receive-fixed swaps. By compressing the holdings in theportfolio, additional cost efficiencies may be seen by having fewertransaction ticket charges when terminating or rolling outstandingresidual positions. Further, such portfolio compression may lead tolower 3rd party costs for portfolio maintenance operations.Additionally, the compression process may utilize a specified roundingprecision (e.g., greater than or equal to 2 decimal places, at least 5decimal places) when compressing holdings of a portfolio. As such, thecoupon blending process may utilize existing market standards and/orsystem infrastructure. In some cases, the pay-fixed and receive-fixedcleared interest rate swaps may have the same attributes but havedifferent fixed rates and/or notional amounts. In some cases, theholdings in a portfolio may be compressed at the expiration of specifiedtime intervals, such as at the end of a trading day, or at the end of acalendar day. For example, the compression may be performed daily,either manually or automatically, as part of an end of day work flow. Insome cases, the compression may be performed on an ad-hoc basis.

FIG. 6 shows an illustrative portfolio 600 having a plurality of swaps,such as swaps 610, according to aspects of this disclosure. The swaps610 of portfolio 600 may have the same, or substantially similar,attributes but different interest rates 620 and/or notional amounts 630as illustrated in the fixed rate column and the notional amount column.In some cases, the rates associated with each of the swaps may have adifferent precision. For example, the rate (e.g., 3.1224) of swap 1 hasa precision set at 4 decimal places, while the interest rate of swap 3(e.g., 1.8) has a precision of 1 decimal place. In some cases, anaverage interest rate, such as the simple average rate 625, may becalculated based on the interest rates 620 associated with the swaps inthe portfolio 600. In some cases, the simple average rate may be roundedto a specified precision (e.g., about 5 decimal places, etc.), such asthe rounded average rate 627. In some cases, other methods may be usedto find an interest rate, such as by computing a median value (e.g.,3.2254) of the interest rates 620 and/or a midrange value (e.g., 2.6525)of the interest rates 620. As mentioned above, the simple average rate625 may be calculated to a precision greater than, or equal to, fivedecimal places. In this illustrative example, the simple average rate625 is shown having a precision of 9 decimal places (e.g., 3.051040000).In some cases, the simple average rate may be rounded to a specifieddecimal place precision, such as the rounded average rate 627 having aprecision of 5 decimal places (e.g., 3.05104).

In some cases, a weighted notional amount for each swap may becalculated, such as by multiplying the notional amount by a constant(e.g., the interest rate). These weighted notionals 640 may be used whenblending the swaps of the portfolio 600. For example, the weightednotionals associated with the swaps in the portfolio may be summed todetermine a net weighted notional 645 associated with the portfolio 600.Similarly, the notional amounts 630 associated with the swaps 610 may besummed to determine a net notional 635 associated with the portfolio.

FIG. 7 shows an illustrative representation of portfolio compressionover time. For example, at the start 712 of Day 1 (e.g., calendar day,trading day, etc.), the portfolio 705 may include “n” swaps (e.g., swap1, swap 2 . . . swap n), such as the swaps 610 of FIG. 6. At a specifiedtime and/or in response to a compression request, the financialinstitution may desire to compress the swaps in the portfolio todetermine a first compressed portfolio 710. For example, the firstcompressed portfolio may include a first remnant trade and a secondremnant trade that result from compressing the swaps included in anuncompressed portfolio, such as the portfolio 705. In some cases, thecompression of the portfolio 705 may occur automatically at the end 715of Day 1. In some cases, the financial institution may automaticallycompress a portfolio at the end of a business day, at the end of atrading day, and/or the like. In other cases, the financial institutionmay compress a portfolio in response to a request for compression. Thisrequest may be received from one or more different sources, such as arequest from a user and/or as a result of a rules-based decision. Forexample, a user may trigger a compression by sending a request tocompress the portfolio. In some cases, a user may monitor and/or sampleinformation associated with a portfolio, such as a number of swapscontained in the portfolio 705, the net notional 635, a net weightednotional 645, and the like. This information may be compared to acriterion to determine whether compression may be warranted. Forexample, the criterion may be associated with one or more of a maximumnumber of swaps to have in a portfolio, a maximum total notional value,a maximum total weighted notional value, and the like. If the criterionis met, then the portfolio 705 may be compressed. In the illustrativeexample, at the end of Day 1, the portfolio 705 is compressed togenerate a second portfolio (e.g., the first compressed portfolio 710),where the second portfolio includes two trades, a first remnant tradeand a second remnant trade. In some cases, the first remnant trade maybe associated with the fixed rate components of the swaps 610 includedin the portfolio 705 and the second remnant trade may be associated withthe floating rate components of the swaps 610.

In an illustrative example, the portfolio 705 may include the swaps 610at the start of Day 1. A compression request may be received from a useror may be otherwise initiated in response to a criterion having been met(e.g., a maximum number of swaps, a maximum notional value, etc.). Onceinitiated, the compression process may begin by calculating an interestrate associated with the plurality of the swaps 610, such as the simpleaverage rate 625 using equation (1) above.

For example, the simple average rate 625 associated with the swaps 610may be calculated to be 3.051040000. In some cases, the simple averagerate may be rounded to a specified decimal precision, such as fivedecimal places, to determine the rounded average rate 627 (e.g.,3.05104). Also, the weighted notionals 640 associated with the swaps 610may be calculated based on the rate and notional amount associated witheach swap. For example, the weighted notional amount may be calculatedusing the equation (2) above, where the rate and the notional areassociated with the same particular swap. For example, swap 1 has aninterest rate of 3.1224 and a notional amount of −100,000,000. As such,the weighted notional amount may be determined to be −312,240,000. Insome cases, the net weighted notional 645 amount may then be calculatedfor the portfolio 600 based by summing the weighted notionals 640, usingthe equation (3) above.

FIG. 8 shows an illustrative remnant trade, such as the first remnanttrade 805 included in the first compressed portfolio 710 of FIG. 7. Whendetermining the first and second remnant trades of the first compressedportfolio 710, the first remnant trade 805 may be derived such that cashflows 820 associated with the first remnant trade equals the total cashflows 830 of the swaps in the portfolio 705. For example, given thetotal cash flows 830 and the fixed rate 627, a notional 807 for thefirst remnant trade 805 may be determined by dividing the net weightednotional 645 by the fixed rate 627, such as by using the equation (5)above.

In some cases, the notional amounts may be rounded to 2 decimal places.For example, in this illustrative case, the notional amount of the firstremnant trade may be calculated as 46,081,515/3.05104=$15,103,543.38. Assuch, the first remnant trade 805 may have an associated fixed rate of3.05104 and a notional of $15,103,543.38.

FIG. 9 shows an illustrative remnant trade, such as the second remnanttrade 905 for compressing the swaps of the portfolio 705 in FIG. 7. Insome cases, the second remnant trade 905 may be determined to match thefloating rate cash flows of the swaps 610 in the portfolio 705. Forexample, a sum of float payments associated with both the first remnanttrade and the second remnant trade may be designed to match the cashflow of the swaps 610. In such cases, the notional 907 of the secondremnant trade 905 may be calculated using the equation (6) above.

In the illustrative example, the notional 907 of the second remnanttrade 905 may be calculated as the net notional 635 for the swaps 610 inthe portfolio (e.g., $6,870,000) minus the notional 807 of the firstremnant trade 805 (e.g., ($15,103,545.38). As such, the notional 907 ofthe second remnant trade 905 may be calculated to be $−8,233,548.38. Asthe fixed rate 627 chosen for the first remnant trade 805 fully accountsfor the fixed rate components of the original trades, the rateassociated with the second remnant trade 905 may be set to 0.

Returning to FIG. 7, at the start of Day 2, the first compressedportfolio 710 may include the first remnant trade and the second remnanttrade. In some cases, such as illustrated for Day 2, no trades may beperformed in association with the first compressed portfolio 710. Assuch, the first compressed portfolio 710 remains the same at the end 725of Day 2 as at the start 722 of Day 2. Because of this, the tradesincluded in the first compressed portfolio 710 do not undergo netting ofdifferent fixed rates or coupon blending because no further reduction inline items and/or net notional value is necessary.

At the start 732 of Day 3, in the illustrative example of FIG. 7, thefirst compressed portfolio 710 may remain the same as at the end of Day2 and include the first remnant trade and the second remnant trade. Insome cases, such as during Day 3, one or more trades may take place suchthat these additional trades may be associated with the portfolio,resulting in the portfolio 720. as shown in FIG. 10. For example, theportfolio 720 may include the swaps 1010 executed on Day 3 and thepreviously existing compressed swaps 1020 (e.g., the first remnant swap805 and the second remnant swap 905).

At the end 737 of Day 3, the portfolio 720 may be compressed similarlyto the compression performed on Day 1. For example, a simple averagerate 1025 may be calculated using the rates associated with the swaps1010, 1020 of the portfolio 720. Also, the net notional value 1035 maybe calculated by summing the notional values of the swaps 1010, 1020,and a net weighted notional 1045 may be calculated by summing weightednotional amounts associated with each of the swaps 1010, 1020 of theportfolio 720. Because the second remnant swap 905 may be a zero couponswap (e.g., have a rate set to 0), the simple average rate 1025 may becalculated without including this swap. For example, the simple averagemay only be calculated based on the swaps having non-zero rates.

FIG. 11 shows an illustrative third remnant trade 1105 that may becreated during a compression of the swaps of the portfolio 720. Forexample, the third remnant trade 1105 may be derived such that cashflows 1120 associated with the first remnant trade equals the total cashflows 1130 of the swaps in the portfolio 720. For example, given thetotal cash flows 1130 and the fixed rate 1027, a notional 1107 for thethird remnant trade 1105 may be determined by dividing the net weightednotional 1045 by the fixed rate 1027, as discussed above in reference tothe first remnant trade. In some cases, the notional amounts may berounded to 2 decimal places. For example, in this illustrative case, thenotional amount of the third remnant trade may be calculated as34,173,459.99/3.67091=$9,309,261.19. As such, the third remnant trade1105 may have an associated fixed rate of 3.67091 and a notional of$9,309,261.19.

FIG. 12 shows an illustrative chart 1200 for calculating a fourthremnant trade (e.g., the fourth remnant trade 1205 of FIG. 13). In somecases, the fourth remnant trade 1205 may be determined to match thefloating rate cash flows of the swaps in the portfolio 720. For example,a sum of float payments associated with both the first remnant trade andthe second remnant trade may be designed to match the cash flow of theportfolio 720. In such cases, the notional 1207 of the fourth remnanttrade 1205 may be calculated using the equation discussed above inreference to the second remnant trade. In the illustrative example, thenotional 1207 of the fourth remnant trade 1205 may be calculated as thenet notional 1035 for the portfolio 720 (e.g., $1,000,000) minus thenotional 1107 of the third remnant trade 1105 (e.g., ($9,309,261.19). Assuch, the notional 1207 of the fourth remnant trade 1205 may becalculated to be $−8,309,261.19. As the fixed rate 1027 chosen for thethird remnant trade 1105 fully accounts for the fixed cash flows of theoriginal trades, the rate associated with the fourth remnant trade 1205may be set to 0. As such, at the end 735 of Day 3, the portfolio 730includes two remnant trades that have been created by compressing theswaps 1010, 1020 of the portfolio 720. For example, the portfolio 730may include the third remnant trade 1105 having a notional of$9,309,261.19 with a rate of 3.67091 and the fourth remnant trade 1205having a notional of $−8,309,261.19 with an associated rate of 0. Assuch, the seven trades included in the portfolio 720 are reduced to thetwo remnant trades of the portfolio 730, where the net notional amountassociated with the portfolios 720, 730 have been reduced from$765,000,000 to under $18,000,000, where all other economic details ofthe two remnant trades of the portfolio 730 match the trades in theportfolio 720 and the first compressed portfolio 710.

The present invention has been described herein with reference tospecific exemplary embodiments thereof. It will be apparent to thoseskilled in the art that a person understanding this invention mayconceive of changes or other embodiments or variations, which utilizethe principles of this invention without departing from the broaderspirit and scope of the invention as set forth in the appended claims.

1. A system comprising: a non-transitory memory storing a firstplurality of data items, each of which is associated with a differentfinancial instrument and includes data indicative of characteristics ofthe associated financial instrument including a first value and a secondvalue, the first plurality of data items being further characterized bya first value based characteristic and a second value basedcharacteristic as a result of the characteristic data of each of thefirst plurality of data items; a computing device including a processorcoupled with the non-transitory memory and configured to: determine whenthe first plurality of data items meets a threshold and, based thereon:access the characteristic data of each of the first plurality of dataitems; determine a first adjustment instrument which combines the firstvalues associated with each of the first plurality of data items suchthat a first value based characteristic of the determined firstadjustment instrument is identical to the first value basedcharacteristic of the first plurality of data items; determine a secondadjustment instrument which combines the second values associated witheach of the first plurality of data items based on the determined firstadjustment instrument such that a second value based characteristic ofthe second adjustment instrument is identical to the second value basedcharacteristic of the first plurality of data items; generate a secondplurality of data items comprising a first data item including dataindicative of characteristics of the first adjustment instrument and asecond data item including data indicative of characteristics of thesecond adjustment instrument, wherein the second plurality of data itemsis characterized by a third value based characteristic and a fourthvalue based characteristic as a result of the characteristic data ofeach of the first and second data items, the third value basedcharacteristic being identical to the first value based characteristicand the fourth value based characteristic being identical to the secondvalue based characteristic; and replace the first plurality of dataitems with the second plurality of data items in the non-transitorymemory, wherein an amount of data stored in the non-transitory memory isreduced thereby.
 2. The system of claim 1, wherein the thresholdcomprises one of a maximum number of instruments included in aportfolio, a maximum total notional value, or a maximum total weightednotional value.
 3. The system of claim 1, wherein the thresholdcomprises a maximum number of instruments to have in a portfolio, thecomputing device being further configured to monitor a size of the firstplurality of data items by comparing the count of the first plurality ofdata items stored therein to the threshold.
 4. The system of claim 1,wherein the computing device is further configured to process the firstplurality of data items, prior to the determination that the firstplurality of data items meets the threshold, to net together any of thefirst plurality of data items having characteristic data indicative of asame first value such that all remaining of the first plurality of dataitems have characteristic data indicative of a different first value. 5.The system of claim 4, wherein the processing of the first plurality ofdata items, prior to the determination that the first plurality of dataitems meets the threshold, further comprises sending a message to atrader associated with the first plurality of data items identifyingthose data items of the first plurality of lines items which may benetted.
 6. The system of claim 4, wherein the processing of the firstplurality of data items, prior to the determination that the firstplurality of data items meets the threshold, is performed periodically.7. The system of claim 1, wherein a total notional associated with thefirst adjustment instrument and the second adjustment instrument is lessthan a total notional associated with the first plurality of data items.8. A computer implemented method comprising: storing, in anon-transitory memory, a first plurality of data items, each of which isassociated with a different financial instrument and includes dataindicative of characteristics of the associated financial instrumentincluding a first value and a second value, the first plurality of dataitems being further characterized by a first value based characteristicand a second value based characteristic as a result of thecharacteristic data of each of the first plurality of data items;determining, by a processor, when the first plurality of data itemsmeets a threshold and, based thereon: accessing the characteristic dataof each of the first plurality of data items; determining a firstadjustment instrument which combines the first values associated witheach of the first plurality of data items such that a first value basedcharacteristic of the determined first adjustment instrument isidentical to the first value based characteristic of the first pluralityof data items; determining a second adjustment instrument which combinesthe second values associated with each of the first plurality of dataitems based on the determined first adjustment instrument such that asecond value based characteristic of the second adjustment instrument isidentical to the second value based characteristic of the firstplurality of data items; generating a second plurality of data itemscomprising a first data item including data indicative ofcharacteristics of the first adjustment instrument and a second dataitem including data indicative of characteristics of the secondadjustment instrument, wherein the second plurality of data items ischaracterized by a third value based characteristic and a fourth valuebased characteristic as a result of the characteristic data of each ofthe first and second data items, the third value based characteristicbeing identical to the first value based characteristic and the fourthvalue based characteristic being identical to the second value basedcharacteristic; and replacing the first plurality of data items with thesecond plurality of data items in the non-transitory memory, wherein anamount of data stored in the non-transitory memory is reduced thereby.9. The computer implemented method of claim 8, wherein the thresholdcomprises one of a maximum number of instruments included in aportfolio, a maximum total notional value, or a maximum total weightednotional value.
 10. The computer implemented method of claim 8, whereinthe threshold comprises a maximum number of instruments to have in aportfolio, the method further comprising monitoring a size of the firstplurality of data items by comparing the count of the first plurality ofdata items stored therein to the threshold.
 11. The computer implementedmethod of claim 8, further comprising processing the first plurality ofdata items, prior to the determination that the first plurality of dataitems meets the threshold, to net together any of the first plurality ofdata items having characteristic data indicative of a same first valuesuch that all remaining of the first plurality of data items havecharacteristic data indicative of a different first value.
 12. Thecomputer implemented method of claim 11, wherein the processing of thefirst plurality of data items, prior to the determination that the firstplurality of data items meets the threshold, further comprises sending amessage to a trader associated with the first plurality of data itemsidentifying those data items of the first plurality of lines items whichmay be netted.
 13. The computer implemented method of claim 11, whereinthe processing of the first plurality of data items, prior to thedetermination that the first plurality of data items meets thethreshold, is performed periodically.
 14. The computer implementedmethod of claim 8, wherein a total notional associated with the firstadjustment instrument and the second adjustment instrument is less thana total notional associated with the first plurality of data items. 15.A system comprising a processor and a non-transitory memory coupledtherewith, the system further comprising instructions stored in thenon-transitory memory and configured to, when executed by the processor,cause the processor to: store, in a non-transitory memory, a firstplurality of data items, each of which is associated with a differentfinancial instrument and includes data indicative of characteristics ofthe associated financial instrument including a first value and a secondvalue, the first plurality of data items being further characterized bya first value based characteristic and a second value basedcharacteristic as a result of the characteristic data of each of thefirst plurality of data items; determine when the first plurality ofdata items meets a threshold and, based thereon: access thecharacteristic data of each of the first plurality of data items;determine a first adjustment instrument which combines the first valuesassociated with each of the first plurality of data items such that afirst value based characteristic of the determined first adjustmentinstrument is identical to the first value based characteristic of thefirst plurality of data items; determine a second adjustment instrumentwhich combines the second values associated with each of the firstplurality of data items based on the determined first adjustmentinstrument such that a second value based characteristic of the secondadjustment instrument is identical to the second value basedcharacteristic of the first plurality of data items; generate a secondplurality of data items comprising a first data item including dataindicative of characteristics of the first adjustment instrument and asecond data item including data indicative of characteristics of thesecond adjustment instrument, wherein the second plurality of data itemsis characterized by a third value based characteristic and a fourthvalue based characteristic as a result of the characteristic data ofeach of the first and second data items, the third value basedcharacteristic being identical to the first value based characteristicand the fourth value based characteristic being identical to the secondvalue based characteristic; and replace the first plurality of dataitems with the second plurality of data items in the non-transitorymemory, wherein an amount of data stored in the non-transitory memory isreduced thereby.
 16. The system of claim 15, wherein the thresholdcomprises one of a maximum number of instruments included in aportfolio, a maximum total notional value, or a maximum total weightednotional value.
 17. The system of claim 15, wherein the thresholdcomprises a maximum number of instruments to have in a portfolio, theinstructions being further configured to cause the processor to monitora size of the first plurality of data items by comparing the count ofthe first plurality of data items stored therein to the threshold. 18.The system of claim 15, wherein the instructions are further configuredto cause the processor to process the first plurality of data items,prior to the determination that the first plurality of data items meetsthe threshold, to net together any of the first plurality of data itemshaving characteristic data indicative of a same first value such thatall remaining of the first plurality of data items have characteristicdata indicative of a different first value.
 19. The system of claim 18,wherein the processing of the first plurality of data items, prior tothe determination that the first plurality of data items meets thethreshold, further comprises sending a message to a trader associatedwith the first plurality of data items identifying those data items ofthe first plurality of lines items which may be netted.
 20. The systemof claim 18, wherein the processing of the first plurality of dataitems, prior to the determination that the first plurality of data itemsmeets the threshold, is performed periodically.
 21. The system of claim15, wherein a total notional associated with the first adjustmentinstrument and the second adjustment instrument is less than a totalnotional associated with the first plurality of data items.